Saturday, July 05, 2008
Gloomy Economy.
This could have been tucked in until Monday sir. I mean do we nor have a right to smile for one day as we celebrate the independence day 4th July 1776, when we got the State form King George of UK?
"Wherever you look at the moment, the data are pretty worrying," Howard Archer, an economist at Global Insight in London, said. "It's a terribly difficult position for the Bank of England." The central bank's main interest rate target, at 5 percent, is already the highest among G-7 countries.
Economists said the economy was lagging slightly behind the U.S. business cycle. The Federal Reserve has moved aggressively, cutting its main rate target to 2 percent currently from 5.25 percent last summer, and Congress moved quickly to enable 130 million households to receive tax rebate checks as part of a $168 billion stimulus program.
In contrast, the British government has little leeway to spend its way out of any slump. The public purse is constrained by two rules - the so-called "golden rule," in which the government borrows only to invest and not to fund current spending, and the sustainable investment rule, in which public sector debt is to be held stable at "a stable and prudent level."
Archer estimated that the British economy would grow 1.4 percent in 2008, sharply slowing from 3.6 percent growth in 2007, and contract by 0.9 percent in 2009. The euro zone will probably grow 1.6 percent this year, down from 2.6 percent growth last year, and expand by 1.2 percent next year, he said.
Newland, the Lehman economist, predicted that the Bank of England would probably feel comfortable reducing rates by one-quarter point in November, and by 1.25 points more next year. "Oil prices are the big uncertainty," he said. "If oil prices don't fall, growth will be much weaker and rates will stay much higher for longer."
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa